Contractors' Questions: Will these IT contractors incur local tax overseas?

Contractor’s Question: As a UK-based IT management consultancy sourcing IT contractors on behalf of our overseas clients, what’s the local tax and compliance position of UK IT contractors going to India and Ghana for business?

Is there a time limitation for such workers in these countries? Also, we are merely a payment facility for the IT contractors – we’re not their employer (their hirers are), but are there tax implications for the hirers too?

Expert’s Answer: From a compliance perspective, work permits would be required as a matter of course for working in BOTH locations for UK nationals.

Moreover, dependant on the period of time spent outside of the UK, there are ongoing considerations in terms of the tax returns to be performed in the UK at the end of the tax year which would require additional investigation with regards to:

  • UK-Ghana DTT (Double taxation treaty - 6 April 1995 for Income Tax and Capital Gains Tax) and UK financial expert advice should be sought on this matter.
  • UK-INDIA DTT (Double taxation treaty - 6 April 2014 for Income Tax and Capital Gains Tax) and UK financial expert advice should be sought on this matter.

To provide you with definitive advice, we would need clarity on the proposed contractual chain and who the “hirer” represents i.e. is this the end-user/client or a local consultancy, management company, or MSP-type entity sat between the UK contractor and end-user/client? This is relevant for deemed employment reasons. Given the way your question is posed, the hirer is suggested to be the “employer” which if this relates to the end-user/client would be more akin to a permanent placement rather than contracting services. This aspect needs clarification for us to advise more fully.

Advising you properly would also require us to know rates, contract locations, durations and possibility of extensions and the individuals' right to work for any given location as a minimum. Plus, it's unclear if your query relates to a single project split over both locations (India and Ghana) or if it relates to individual projects in each location. These aspects are pivotal to an accurate response here. Split location contracts are naturally more complex and would require a more in depth investigation to ensure compliance in all locations.

As mentioned above, the duration of the services to be performed in each case is fundamental to the content of the response we would give you if your firm engaged us. For example, a one-month duration in India or Ghana with no possibility to extend will pose significantly different issues to a 6-12 months contract duration in either location.

For background purposes, it may help you to know that we operate a full Indian payroll with immigration support services for expats wishing to work compliantly in-country and self-employed models for those with a pre-existing right to work where no local immigration sponsorship is required. Bear in mind, a similar approach would potentially be required for Ghana although we do not have any facility to offer immigration support for Ghana. Indeed, for your Ghana assignment, I recommend that you source a local partner company to facilitate this.

The expert was Jon Clarke, Commercial Compliance Director for the EMEA region of CXC Global, a compliance specialist for UK IT contractors working overseas.

Editor’s Note: The expert's answer is an updated version of the original.

Related Reading -

Contractors’ Questions: How to contract abroad from overseas?

Contractors’ Questions: Will a home and abroad IT contract be taxing?

Contractors’ Questions: How to give my PSC three offices overseas?

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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